From Subprime Loans to Subprime Growth? Evidence for the Euro Area

Cihák, Martin and Petya Koeva Brooks

No 09/69, IMF Working Papers from International Monetary Fund

Abstract: The global financial crisis has highlighted the potential of financial conditions for influencing real economic activity. We examine the linkages between the financial and real sectors in the euro area, finding that (i) bank loan supply responds negatively to declines in bank soundness; (ii) a cutback in bank loan supply has a negative impact on economic activity; (iii) a positive shock to the corporate bond spread lowers industrial output; and (iv) risk indicators for the banking, corporate, and public sectors show an improvement beginning in 2002–03, followed by a major deterioration since 2007. These estimates imply that the currently estimated bank losses would subtract some 2 percentage points from the euro area output (but with considerable uncertainty around the estimates).

Keywords: Credit risk; Euro Area; Financial sector; Real sector; Banking; Demand for money; Interest rates; Financial risk; Economic models (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-eec, nep-fdg, nep-mac and nep-ure
Date: 2009-03-27
View list of references

Downloads: (external link)
http://www.imf.org/external/pubs/ft/wp/2009/wp0969.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:imf:imfwpa:09/69

Ordering information: This working paper can be ordered from
http://www.imf.org/external/pubs/pubs/ord_info.htm

Access Statistics for this paper

More papers in IMF Working Papers from International Monetary Fund
Address: International Monetary Fund, Washington, DC USA
Contact information at EDIRC.
Series data maintained by Christopher F. Baum ().